Forecasts Today - The Euro to Pound Short-Term Exchange Rate Predictions See Losses

August 17, 2014 - Written by Ben Hughes

STORY LINK Forecasts Today - The Euro to Pound Short-Term Exchange Rate Predictions See Losses

The FX markets saw the Euro to Pound (EUR/GBP) exchange rate trading between the regions of 0.8005 and 0.8031 on Friday, following uncertainties surrounding the unrest in Ukraine and Russia.

The Eurozone has made advancements in communication with Russia this week, with talks undertaken to try and calm the unrest that’s causing volatility in the currency market.

The latest EUR exchange rates can be seen below, updated for the start of the new trading week:

- The pound to euro exchange rate is +0.08 per cent higher at 1.24967.
- The euro to pound exchange rate is -0.08 per cent lower at 0.80021.
- The euro to dollar exchange rate is +0.01 per cent higher at 1.33914.
- The dollar to euro exchange rate is -0.01 per cent lower at 0.74675.

Eurozone Fears Damage From Russian Sanctions; Meetings for Resolution Underway

The Eurozone has seen a stuttering this week in its recovery following surprisingly downbeat Eurozone data releases and back and forth disagreements with Russia.

Friday signalled a meeting between the Russian and Finnish Presidents which was hoped would enable less dispute between the 18 nation Eurozone and Russia. The meeting is expected to be the next step toward a ‘peaceful settlement of the internal political crisis in Ukraine and measures to prevent human catastrophe’ as stated by the Kremlin. As Russia has imposed bans on imports from the EU, Finland was expected to be heavily affected as the majority of their exports reached Russia.

Furthermore Wednesday saw the Finnish Prime Minister Alexander Stubb announced to the EU: ‘My message to them had two points. First we will impose no new sanctions in response. Second, our agrarian sector needs certain assistance.’ Stubb also explained that Finland’s relationship with Moscow is a strong one that could prove beneficial.

Meanwhile, banks within the Eurozone are claiming that sanctions placed against Russia are to remain in use for anything up to three months. Denmark’s Danske Bank stated in a report on Thursday: ‘We believe an escalating trade war would be unbearable for both Russia and the EU and that the EU will revoke the sanctions within one to three months, with Russia abolishing its own sanctions.’

Forecast For the Upcoming Week

The Pound may see further volatility in the week ahead with a wealth of data publications. UK House Prices will be revealed early on Monday, followed by Tuesday’s highly influential Consumer Price Index, Retail Price Index and Producer Price Index. Thursday’s publication of Retail Sales and Public Finances may also affect Sterling’s exchange rate in the currency market. Meanwhile Monday will see the publication of the Eurozone Trade Balance, whilst Thursday will prove influential with French, German and Eurozone Composite, Services and Manufacturing PMI statistics.

The UK meeting minutes will be carefully viewed however with respect to any hawkish remarks for Sterling and interest rate hikes. This week saw the Bank of England Inflation Report released that stated that another unanimous vote had taken place with regards to interest rate hikes in the UK. Governor for the Bank of England Mark Carney however stated that the UK economic growth was becoming more promising stating: ‘Sustained economic momentum is looking more assured. The economy is returning to a semblance of normality.’ However Mr Carney disappointed many by suggesting that the UK economy would be unable to sustain interest rate hikes with ‘uncertainty about the current degree of slack’ left in the economy.

It remains to be seen what developments will occur between Russia and the Eurozone and how long the sanctions will remain in place. However, for the foreseeable future it appears the Eurozone is facing severe headwinds and the European Central Bank will need to make amendments to their monetary policy plans in order to encourage the Eurozone recovery to perform productively.

Pound to euro (GBP/EUR) Exchange Rate Strengthens on Carney Comments

The Pound Euro exchange rate is currently gaining in the currency market at 1.2501, following Governor for the Bank of England, Mark Carney’s, comments over the weekend regarding interest rate hikes.

Last week saw interest rate speculation dashed, whilst Sunday has shown another conflicting comment by the Governor stating that wage increases won’t affect the pace of interest rate hikes.

The Euro is suffocated with speculation as to what measures are left for the European Central Bank (ECB) to take to help encourage the Eurozone recovery. So far this session the EUR/GBP exchange rate has reached session highs of 0.8011 and lows of 0.7994.

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